CEO pay increases took a brief pause in 2015 dropping to a paltry median of just $10.8 million with most getting a pay cut or a raise of less than 1.5%. But, as the Wall Street Journal points out this morning, the CEO's of America can once again rest assured that their families will not starve to death as 2016 pay soared nearly 7% setting a post-recession record.
Median pay for the chief executives of 104 of the biggest American companies rose 6.8% for fiscal 2016 to $11.5 million, on track to set a postrecession record, according to a Wall Street Journal analysis.
Twice as many companies increased their chiefs’ pay as reduced it, though a few high-profile bosses took substantial pay cuts, including Apple Inc.’s Tim Cook and General Electric Co.’s Jeff Immelt.
The higher pay was doled out as the stock market notched strong gains and corporate profits rebounded over the course of 2016. “If ever there was going to be a good year for CEO pay, it was going to be 2016,” said David Yermack, a finance professor at New York University’s Stern School of Business who studies executive pay.
As usual, operating results had limited impact on CEO earnings potential and some of the largest payouts went to CEO's who were fired in 2016.
Some of the biggest paydays went to companies in transition—or even turmoil. Philippe Dauman, who was forced out as chief of media giant Viacom Inc. in August, made $93 million during the year. The total includes $58 million of exit payments, promised under his 2015 employment agreement. A Viacom spokesman declined to comment.
At Johnson Controls International PLC, Alex Molinaroli made $46.4 million in the year ended Sept. 30, more than double the $21.7 million he made the prior year. Last fall, he split off an auto-parts business that accounted for a significant part of Johnson Controls’ revenue and closed a $14 billion merger with Tyco International PLC. A Johnson Controls spokesman declined to comment.
Meg Whitman made $35.6 million in the year ended Oct. 31 as chief executive of Hewlett Packard Enterprise Co., which was created when she split Hewlett-Packard Co. into two companies in late 2015. That is more than double the $17.1 million she made a year earlier at the combined company.
Her latest package included a special equity grant tied to the launch of HP Enterprise. Aside from such one-time items, “Meg’s target compensation has remained unchanged over the past three years,’’ an HP Enterprise spokeswoman said, referring to a portion of the CEO’s pay package.
Thomas Falk of Kimberly-Clark Corp. received a 29% raise, compared with a 21% pay cut in 2015 and bringing his total compensation to $15.7 million in 2016 from $15.4 million two years earlier.
Mr. Falk’s raise came even as the maker of Huggies diapers and Kleenex tissues posted a shareholder return of -7.7% last year compared with 14% a year earlier.
A Kimberly-Clark spokesman said the company considers its three-year shareholder return of 25% and five-year return of 90% better measures of Mr. Falk’s performance.
And here's how the top 20 highest paid CEO's in America made out in 2016:
Much of the higher pay was awarded in various forms of restricted stock or stock options. The compensation increases have come about because rising equity awards have more than made up for declines in cash incentive pay, according to a separate analysis by Institutional Shareholder Services, the large proxy advisory firm.
While cash bonuses have fallen about 1.4% among the companies that have filed pay disclosures, stock awards have risen 7.4% and option awards have risen 3%, noted John Roe, head of analytics at ISS.
Of course, that's hardly any consolation for the average American worker who just saw his real earnings collapse over the past two years and actually turn negative in 2017.